Contagion in the interbank network: An epidemiological approach

Arbeitspapier

This paper analyses the importance of individual bank-specific factors on financial stability. First, we use a novel method to model the spreading of the contagion in the interbank network by implementing an epidemiologic model. Actual data on European banks is exploited with simulated scale-free networks. The average contagion affected 70% and 40% of European banks' total assets in 2007 and in 2010, respectively. Country-level results suggest that French, British, German and Spanish banks are the most contagious ones, whereas banks from Ireland, Greece and Portugal induce only limited negative effects. Secondly, cross-sectional panel estimations are performed to disentangle the leading indicators influencing the level of contagion. Bank clustering, large in-coming interbank loans and bank reputation are more prominent explanatory variables than the size or leverage. Finally, central banks' interventions reduce contagion only slightly.

Object Details

• ISBN: 978-952-6699-35-6
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bank of Finland Research Discussion Papers ; No. 19/2013

Classification and Topics

• Classification: Wirtschaft ; Financial Crises ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Statistical Simulation Methods: General
• Subject: contagion ; banks ; Europe ; interbank ; epidemiology ; panel regression

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Toivanen, Mervi
• Event: Veröffentlichung
• (who): Bank of Finland
• (where): Helsinki
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/212259
• Last update: 10.03.2025, 11:42 AM CET